Nike Inc. (NYSE:NKE) | Consumer Discretionary, Textiles, Apparel & Luxury Goods | Reports March 21, After Market Closes
Key Takeaways
- The Estimize consensus is looking for earnings of 55 cents per share on $8.47 billion in revenue, 3 cents higher than Wall Street on the bottom line and right in line on the top.
- Management’s decision to discontinue reporting future orders puts additional pressure on margins to excel.
- Increased competition from Under Armour (NYSE:UAA) and Adidas (DE:ADSGN) as well as a rapidly changing retail environment puts pressure on Nike to innovate and expand globally.
Nike headlines a slow week of earnings with its highly anticipated fiscal third-quarter report Tuesday afternoon. Dismal reports from Under Armour and other footwear retailers this earnings season portends pressure to the downside for Nike’s announcement. As a result, analysts at Estimize cut earnings estimates 11 percent and revenue 2 percent from previous forecasts at the end of the fiscal second quarter. Despite some obvious near-term headwinds, the stock jumped 15.2 percent higher in the past 3 months and historically performs well immediately through an earnings report
The Estimize consensus data earnings of 55 cents per share, reflecting a 3% increase from a year earlier. Revenue for the period is forecasted to increase 5% to $8.47 billion, marking steady mid single digit revenue growth for 8 consecutive quarters.
The fiscal second quarter restored investors' faith that Nike can stave off increasing competition, namely from Adidas, while still maintaining margins and future orders growth. In the three-month period ending in November, gross profit came in at $3.62 billion with 44.2 percent margins. Future orders, on the other hand, slipped 4 percent in North America but still posted overall growth of 2 percent on a constant currency basis. Management also reveal that it would discount reporting future order figures, making margins all the more important moving forward.
With Adidas, Under Armour and Lululemon (NASDAQ:LULU) all making strides in the retail industry, Nike faces an uphill battle to remain king of the hill. Nike’s clear market-share lead, superb brand reputation and ongoing prowess for innovation and design will help it maintain a significant gap between the competition. However growth opportunities in domestic markets are running out as Nike controls over 50% of the market in all major sporting segment. The best case for Nike is to expand global shares in Europe and Asia where its presence holds a less-pronounced presence.
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